Economics

Gross domestic product (GDP) measures the market value of goods and services from production factors such as labor and capital in a country within a given period of time. On the other hand, gross national product (GNP) measures the market…

[vsw id=”Kh3Lq2F_D3Q” source=”youtube” width=”611″ height=”344″ autoplay=”no”] There are many effects of exchange rates on countries’ international trade and capital flow. Most of them are listed below. Changing Prices of Currencies Shifts in the supply and demand of products change the…

Almost every exchange rate regime has its flaws, virtues, and particularities. Since exchange rates in different currencies fluctuate due to the influence of market forces, some nations peg their currencies on other currencies. Others, still, have market-determined floating rate regimes….

Forward Discount A forward discount is when the current domestic spot exchange rate is traded at a higher level than the current domestic future spot rates. The analysis of the expectations from a market depends mostly on discounts and premiums….

The interest rate difference between two countries affects the spot and forward rates. Using a single period analogy, an investor who has funds to invest in treasury securities, has two alternatives:

Forward Quotations The points on a forward rate quote are the differences between the spot exchange rate quote and the forward exchange rate quote. These points are scaled to relate to the last decimal in the spot quote. It is…

Spot Exchange Rates It is possible to back out the cross rates given two exchange rates involving three currencies. Considering a foreign exchange market with the exchange rate between the South African rand and the Chinese yuan, this market can…

Calculating Percentage Appreciation/Depreciation To calculate the percentage change, one needs to clearly understand the base currency and the price currency.  Let’s take the Chinese Yuan (CNY) and South African Rand (ZAR) example. The ZAR/CNY exchange rate increased from 1.6459 to…

Functions of the Foreign Exchange Market The foreign exchange market facilitates the international trade of goods and services. Companies and individuals from different countries need to conduct business transactions in foreign currencies.

The term exchange rate refers to the price of one currency in relation to another currency. For example, the exchange rate between the Chinese Yuan (CNY) and the South African Rand (ZAR) is 1.93. This means that the base currency,…